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Challenges Ahead on Arctic Drilling

By Clifford Krauss August 5, 2011 11:58 amAugust 5, 2011 11:58 am

Royal Dutch ShellA long process: a vessel collecting seismic data for Shell in the Beaufort Sea in 2009.

As John Broder and I report in The New York Times, Shell won a big victory by gaining conditional approval from the Interior Department for its plan to drill for oil in the Beaufort Sea off the North Slope of Alaska. The decision takes the company a giant step closer to drilling oil wells in the Arctic after five years of trying to break through court and regulatory hurdles. But the battle is not over, and environmentalists will surely redouble their efforts.

Shell executives say that their discussions with the White House, Interior Department, Environmental Protection Agency and other agencies have gone extremely well in recent weeks, reflecting a will by the Obama administration to move forward — perhaps because thousands of jobs are at stake and consumers are upset about high gasoline prices.

Here is something of a road map for the fight ahead.

Last year, drilling appeared to be on track until an E.P.A. appeals panel delayed an air quality permit because it wanted more time to consider the potential impact of exploration rigs’ diesel emissions on local indigenous communities. Shell decided six months ago to put off drilling until 2012, fearing it would not have time to get equipment in place for the summer drilling season.

Complicating the political calculus was last year’s deadly accident and oil spill at a BP well in the Gulf of Mexico.

Shell executives say that the climate for negotiations has since improved and that the E.P.A. is moving the process along at a faster pace. They also complimented the Bureau of Ocean Energy, Management, Regulation and Enforcement for moving quickly in submitting data to a federal court in Alaska in a lawsuit challenging Shell’s 2008 lease sale in the Chukchi Sea, west of the Beaufort in the Arctic.

For the Beaufort drilling plan, the company will need a permit from the Fish and Wildlife Service certifying that the operations will not put polar bears and walruses at risk. The National Marine Fisheries Service will need to issue a similar permit contingent on an assessment that whales and seals will be protected.

If those permits are granted, as Shell executives anticipate, they could then be challenged in court, however.

It’s a good bet that the Department of Interior’s decision to grant approval to the Beaufort Sea drilling plan will be challenged. Up next: the administration’s decision on whether to let Shell drill in the Chukchi Sea, which is more remote. If it is approved, that could be challenged too. In fact, as I just indicated, Shell’s original lease sale there remains in the courts.

The company has already spent $4 billion on the Arctic effort without drilling a single hole. Its lawyers will be busy.

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